Medicare Basics
Original Medicare (Part A & B)
Generally, Medicare requires beneficiaries to be 65 years old to be eligible for Parts A & B. There are some circumstances when individuals on disability under the age of 65 can enroll. If you’ve received Social Security Disability Income (SSDI) for at least 24 months, you qualify for Original Medicare.
Medicare Eligibility - For Under 65
You must be a US citizen OR have been a legal resident for the past 5 years AND one of the following conditions apply:
- Have been diagnosed with “Lou Gherig’s Disease” (amyotrophic lateral sclerosis – ALS)
- Have end-stage renal disease (ESRD)
- Have end-stage renal disease (ESRD). Have received SSDI for at least 24 months
Medicare Eligibility - For 65+
You must be a US citizen OR have been a legal resident for the past 5 years AND one of the following conditions apply:
- Paid Medicare taxes while working for at least 40 quarters (10 years). You qualify for premium free Part A
- Paid Medicare taxes while working for fewer than 40 quarters (10 years). You will pay a premium for Part A
Once you meet the age, residency or disability/diagnostic requirements, you will automatically qualify for Medicare health coverage.
Income is NOT a factor in determining Medicare eligibility. You are entitled to coverage as long as you have met the basic eligibility requirements outlined above.
Your income WILL detemine how much you pay for your coverage. If you have an annual income over a specific limit, you will be responsible for additional premiums based on IRMAA (Income Related Monthly Adjustment Amount). This will affect the premiums paid for Part B (Medical) and Part D (prescription drug plans). With original Medicare Parts A and B, you can go to any doctor at any hospital in the country that works with medicare – there are no “network” coverage restrictions.
When you’re first getting started with Medicare there can be a lot to learn and consider and it might seem overwhelming let’s start at the beginning with the ABC’s and D of Medicare.
Medicare includes parts that are the building blocks of your health and drug coverage – Part A, Part B and Part D and there’s also a Medicare Advantage sometimes known as Medicare Part C.
Part A
Medicare Part A is sometimes called hospital insurance as it covers hospital care like inpatient care at a hospital, skilled nursing facility, Hospice care and some home health care. Usually you don’t need to pay a monthly premium for Part A.
Part B
Medicare Part B medical insurance covers services like certain doctor visits, outpatient care, medical equipment (like wheelchairs and canes) and preventive services like flu shots. With Part B you’ll pay a premium every month. In many cases, if you don’t sign up when you’re first eligible you’ll have to pay a late enrollment penalty which is added to the monthly premium cost for as long as you have Part B so it’s important to pay attention to your deadlines.
PART C
While Original Medicare Parts A & B may cover most medical expenses for some, there are certainly risks involved given the required co-payments once you reach your initial deductible.
Part C coverage come from private insurance companies that take on your risk from the gaps in Original Medicare. Also known as Medicare “Advantage” plans, these policies go beyond Original Medicare by offering additional benefits ranging from prescription drug coverage, dental, vision, hearing while some also offer gym memberships and over the counter (OTC) medications and supplies.
If you choose Medicare Part C, you can get a basic Medicare Advantage plan (MA) which would mean you are eligible for a sepearate Part D prescription drug plan OR you can include prescriotion drug coverage in what is known as a Medicare Advantage with Part D (MAPD) plan. In most cases, whether you select MA or MAPD, you’ll need to use doctors who are in the plan’s network.
Part C plans are required to at least match the coverage found in Original Medicare and will then become your primary source of health insurance. Since there are several Part C plan types, costs may vary widely. One benefit of Part C plans is that they are guaranteed issue when you become eligible – there are no health questions and you cannot be denied coverage for any reason. If you wait to enroll after your initial eligibility period, you will be subject to this is not the case.
PART D
Medicare Part A and Part B are both under what’s called Original Medicare and provide basic hospital and doctor coverage. If you want drug coverage too, then you can join a separate Medicare Part D plan. Medicare Part D coverage is provided by private companies that offer a range of coverage options. You’ll pay a monthly premium that depends on the plan option you choose. Remember to consider your plan options when you’re first eligible to avoid late enrollment penalties.
THE DONUT HOLE
The Part D coverage gap (aka “donut hole”) officially closed in 2020 as a result of passage of the Inflation Reduction Act and changes will roll out slowly until fully implemented.
Medicare beneficiaries will see a Part D deductible up to $505 in 2023, followed by an Initial Coverage Period in which they will be responsible for 25% of costs up until they reach the threshold of $4,660 spent on prescription medications.
As illustrated by this chart, total out-of-pocket costs will need to reach $7,400 before a beneficiary reaches the Catastrophic Benefit Period.
Your Medicare Part D costs for prescription drugs may change throughout the year in phases depending on where you stand in meeting your plan’s deductible and coverage limitations. The four phases are:
- Deductible (if applicable, may vary by plan)
- Initial Coverage
- Coverage Gap* (aka The Donut Hole)
- Catastrophic Coverage*
* Catastrophic Coverage phase will be removed in 2024 and the Coverage Gap will be removed in 2025 due to the passage of the Inflation Reduction Act.